The prime minister, left above, and his (now ex-) finance minister, right, have dominated Canadian government for most of ten years. Now they're openly at war

THE Liberal Party has governed Canada for the past 8½ years, indeed most of the past 100. Today, it looks ready to tear itself apart, even if only temporarily, over the rivalry between Jean Chrétien, prime minister since 1993, and Paul Martin, who has been his finance minister all those years—and reckons it is now time he had the top job. After months of crossfire, Mr Martin on June 2nd lost his post.

Did he jump, or was he pushed? The two men disagree. Mr Martin admits he was “at the edge of the Rubicon”, supposedly over policy differences with the prime minister—which is odd, since Mr Chrétien is often criticised for having no distinct policy—but claims he was still considering his options when he heard on the radio that he had been replaced by John Manley, the deputy prime minister. Mr Chrétien says Mr Martin “quit”.

Whatever the detail, Mr Martin had at least climbed out on the window-ledge. But Mr Chrétien, having lost a popular and effective finance minister, now faces a party in deep disarray and near-revolt. The stage is set for civil war over the months up to the party convention next February, when delegates from its 301 constituency associations will vote on the leadership.

The skirmishing has already begun. Mr Chrétien faced a broadside on June 3rd, when he gave Parliament his version of the break. His brief tribute to Mr Martin's good work brought a lengthy standing ovation for the former finance minister. A caucus meeting on June 5th left Liberal MPs bitterly divided, with some demanding that Mr Chrétien stand down now.

The two men's rivalry goes back to 1990, when Mr Chrétien returned from a short spell in law practice to take over leadership of the Liberals, by then in opposition. Mr Martin, a successful businessman and first-term MP, came a strong second in that leadership vote. When the Liberals won the 1993 election, Mr Chrétien gave him the finance portfolio, and the pair worked in apparent harmony to end the era of budget deficits and, through tax reforms and astute management, to put the economy on a sound basis. This helped the Liberals to win again in 1997 and 2000.

But as Mr Chrétien, who was 68 in January, kept hinting he might want to stay in office for yet a fourth election, his heir-apparent, who is little more than four years younger, grew impatient. Mr Martin's father had come second to Lester Pearson in the leadership stakes a generation before, and the younger man has clearly wanted to redress history by winning the top job. He has worked tirelessly to that end.

In recent months the infighting had come to the surface. Martin supporters control most of the constituency associations, and have successfully resisted rules that would allow massive recruitment by Chrétien loyalists or other would-be leaders to challenge that control. Lately, a number of scandals relating to government and other contracts have rocked the cabinet. Mr Chrétien had to pack one public-works minister off to Denmark as ambassador, and then demote his successor for taking a holiday in a contractor's lakeside home. On May 26th he dismissed his defence minister, Art Eggleton, when a newspaper revealed that the minister had secured a C$36,000 ($23,500) contract for a former girlfriend to write a 14-page report.

Rightly or wrongly Mr Chrétien suspected that Mr Martin's friends had been leaking tales of such scandals to the media, and denounced him in a heated cabinet meeting on May 30th as a “destabilising influence”. He also ordered all would-be successors—who, besides Mr Martin, include Mr Manley and the industry minister, Allan Rock—to stop their thinly veiled leadership campaigns. Mr Martin responded by saying publicly that he would have to review his options. Mr Chrétien duly pushed him out, saying he would relish a fight at next February's convention.

On thin ice

Reaction in newspapers that normally support Mr Chrétien's government has been hostile: columnists have used phrases like “dead man walking” to describe him. His popularity, which began to dip after the Liberals lost two by-elections in mid-May, is slipping. One poll says 68% of voters want him to quit. Mr Martin is notably more popular in Quebec—Mr Chrétien's home province—and in the west, besides being well entrenched in Ontario, most important of the provinces.

Mr Chrétien need not worry about a cabinet revolt and may use the power of fear to quell dissidents in his 170-strong caucus. Nor, with such a majority, need he be anxious about a no-confidence vote in Parliament. But Mr Martin is remaining as a backbencher, and everyone assumes he will be organising for the leadership vote in February. On the way, there will be scattered struggles through the autumn to win or retain control of Liberal constituency associations and thus of the selection of delegates to the party convention.

Mr Chrétien meanwhile will have other preoccupations, such as chairing the G8 summit this month and running the country. In contrast, Mr Martin, buoyed up by public esteem for his success in his past post, will be free to travel and canvass local associations, advancing policies of his own—a new financial deal for cities will probably be one—calculated to win him the post he hopes for in future.

The Martin legacy

Success? Canada's economy had a lacklustre 2001, did it not? True, but look at the statistics released two days before Mr Martin lost his job: growth at an annual rate of 6% in the first quarter of this year. This week the Bank of Canada felt it must respond by raising its target for the overnight interest rate from 2.25% to 2.5%, the second rise in seven weeks. Then look at the doubts about recovery south of the border.

The growth owes something to recent—and reversible—rises in energy prices: Canada is a net oil and gas exporter, in notable contrast to its neighbour; indeed, thanks to a new offshore field, Newfoundland, poorest of the ten provinces, is expected to lead them all in growth this year. Overall, the balance of payments is well in the black.

Longer-term too, Canada has been fortunate. A free-trade pact with the United States in 1988, followed in 1993 by the North American Free Trade Agreement (which includes Mexico), put pressure on many businesses to become more efficient. “We've become much more export-intensive,” says Aron Gampel, deputy chief economist at the Bank of Nova Scotia in Toronto. A weak currency also helped. And Canada escaped some of the telecoms and dotcom excesses that marked the American economy in the later 1990s.

Yet Canadians also owe a good deal to their former finance minister. When Mr Martin took over in 1993, the federal deficit was almost 6% of GDP; for the past five years the budget has been in surplus, and still is, despite tax cuts. Under Mr Martin, the national debt shrank from two-thirds of GDP to about half.

Yet voters' memories and gratitude are fickle. Canadian cities, especially Toronto, remain in the grip of a feverish housing boom: permits for new homes were 68% higher in April than a year earlier. New car and truck sales were 10% higher in May. Households still have much less debt than do American ones. If Mr Manley, who has promised to stick to his predecessor's priorities—balanced budgets, reduced debt, low inflation, tax cuts and “key investments”—can ensure calm, steady growth, will it be Mr Martin who gets the thanks?

To achieve steady growth may not be easy. Business is confident: its spending on plant and equipment was healthily up in the first quarter. But, though many Canadians may be tempted to believe otherwise, their economy cannot prosper for long without vigorous growth in the giant to the south. The United States buys 85% of Canada's exports, and Americans are by far the biggest foreign investors.

The converse risk is overheating and a crash stop. The central bank, fearful that spare capacity is dwindling, raising the risk of inflation, has made plain that it will hike rates yet again if the economy goes on galloping ahead. Economists would not be surprised to see the overnight rate at 5% by mid-2003—and maybe higher still, if the Liberal leadership battle encourages Mr Chrétien and Mr Manley to undo Mr Martin's good work by trying to spend their way to popularity.